Kelty Plans on Immediate Halt to City Spending of TIF FundingUse of TIF Funding by Current Administration Little More than “Slush Fund”
* Press Release * Sep 13, 2007
FORT WAYNE, IN, – Mayoral candidate Matt Kelty announced today his plans for a halt, and then a change in direction, for the City’s use of Tax Increment Financing (“TIF”) districts. Kelty claims the current administration has turned a valuable economic tool into the equivalent of a development “slush fund”, with little oversight or accountability for how TIF funds are spent.
“TIF districts are supposed to be closed out when the development project is done, so that the increased tax revenue from the improved property can be used to fund our schools, fire and police protection, and other essential functions of city and county government,” said Kelty. “That’s one of the core purposes of a TIF district—to grow our tax base so the individual tax burden can be reduced.”
A TIF District is established to re-pay bonds used to support economic development at a specific site and for a specific purpose. After a project is completed and the property is worth more, the property yields additional property tax dollars—but these dollars are captured by the Tax Incremental Finance District and spent only to re-pay the public debt. With TIF districts, public investment in a project is paid for, or repaid by, the additional or “incremental” increase in property taxes generated by the finished project. The entire increase, which can be substantial with a project like Jefferson Pointe, can only be used for the direct benefit of the TIF area until the project is complete. Regardless of how much the property tax revenue increases, city and county budgets, the schools, and other local government operations get no benefit from the increase while the TIF remains in place.
“Jefferson Pointe has generated millions of dollars of ‘extra’ property taxes above what was needed to complete the project and pay off the bonds, and not one penny of it has made its way into the City, County or school corporation budgets,” says Kelty. “Instead, the administration has continually amended and expanded our TIF districts, and broadened the scope of the projects.
By keeping the TIF districts open, and keeping the millions of dollars of taxes they generate segregated, we are able to pretend that we have huge amounts of money available to build baseball stadiums—while we don’t have money to refurbish our schools or take care of our pension debt to our firefighters. If the money is in a “separate pocket,’” its because the Mayor’s office has kept the money out of the pocket that pays for basic services for this City.”
Kelty wants to change that.
“When the TIF project is complete, the TIF needs to be closed, so those revenues are received and accounted for in our city, county and school budgets.”
Until the harm caused by inappropriately extending TIF districts is fully understood, Kelty proposes an immediate, temporary halt to the following:
1. Expansion or amendment of existing TIF districts
2. Commitment of funds to any new projects within existing TIF districts
In addition, Kelty will halt all new purchases of real property by the Redevelopment Commission using TIF funds—unless the property is within an existing TIF district, the purchase is first discussed and approved by the Commission at a public meeting, and the property is first appraised.
As Mayor, Kelty intends to conduct a thorough review of all existing TIF districts and, if necessary, an audit of revenues and expenditures.
“We need to know exactly where we stand with each of these TIF districts—how close we are to concluding the public commitment; what balance remains to be paid; how much the incremental revenue increase is; and how soon we can close the TIF so those funds can be used responsibly as ordinary property tax dollars. The current approach has been the opposite: when the project is nearly complete, we look for a way to keep it going and keep the TIF money separate.”
Kelty states that closing the TIF districts when the initial project is completed will also bring greater transparency and accountability to City operations.
“There is something fundamentally wrong when the City Council, the elected fiscal body, doesn’t know until long after the fact that the Redevelopment Commission has committed millions of TIF dollars to purchase property outside of any existing TIF district or approved Economic Development Area. These were decisions made in executive sessions, with no public record and no recorded votes, which led to the ludicrous situation where we obtained required appraisals after we bought the property, not before.”
Kelty contends that keeping so much revenue in the TIF district and outside the City budget (and City Council’s normal review procedures), encourages government to act in secret and is a clear temptation to favoritism.
“When government is allowed to act in secret, it’s usually for issues of national security, or at least public safety, not to try to get a good price on a piece of land wanted for public entertainment.”
More information concerning Kelty’s planned approach to TIF districts is available in his TIF Policy Statement at his website, www.mattkelty.com.